TaxTMI 
TaxTMI 
2019 (5) TMI 1373
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....1 (1A) of the IT Act, 1961 amounting to Rs. 59,65,182/-. 3. The learned Commissioner of Income Tax (Appeals) erred in holding that university employees were to be considered as government employees and were therefore eligible for exemptions under sections 10(10)(i), 10(10A)(i) and 10(AA)(i). 4. The learned Commissioner of Income Tax (Appeals) overlooked that employees of a university are not holders of civil posts and are therefore not government employees. 5. The learned CIT(Appeals) erred in treating University as part of "State" even though the Income Tax Act in several sections such as section 192(2A) and section 10(10C) clearly distinguishes a university from government. 6. The Learned CIT(Appeals) overlooked that employees of Universities are neither recruited by the State PSC nor paid from the consolidated fund of the State Government. They are employees of the University and not of the Government. 7. The Learned CIT(Appeals) overlooked that a University does not perform any sovereign function of the State; rather a university is a product of a statue of the State. 8. The Learned CIT(Appeals) overlooked that definitions o....
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.... established or incorporated by or under a Central, State or Provincial Act and an institution declared to be a University under section 3 of the University Grants Commission Act, (3 of 1956) ; or . (vii) an Indian Institute of Technology within the meaning of clause (g) of section 3 of the Institutes of Technology Act, 1961 (59 of 1961) ; or (viia) any State Government; or (viib) the Central Government; or (viic) an institution, having importance throughout India or in any State or States, as the Central Government may, by notification in the Official Gazette sppecify in this behalf; or (viii) such institute of management as the Central Government may, by notification in the Official Gazette, specify in this behalf; or [on his] [voluntary retirement or termination of his service, in accordance with any scheme or schemes of voluntary retirement or in the case of a public sector company referred to in sub-clause (i), a scheme of voluntary separation, to the extent such amount does not exceed five lakh rupees: Provided that the schemes of the said companies or authorities or societies or Universities or the Institutes referred to ....
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....there is specific provision & separate treatment provided for in the Income Tax Act to tax the retirement benefits of the University employees than the Government servants, Article 12, which deals with the fundamental rights is not attracted. Therefore, the Assessing Officer reiterated that the assessee cannot be treated as part of Government and the employees of Mahatma Gandhi University do not fall under the category of Government Employees and as such the exemptions available to the Government employees will not be applicable to the University employees. Hence, TDS is to be made on taxable portion of the payment of DCRG, Commutation of pension & leave salary. The Assessing Officer passed the order u/s. 201(1) and 201(1A) of the Act raising the demand of Rs. 59,65,182/-. 4. On appeal, the CIT(A) held that the assessee is to be treated as "State" for the purpose of application of TDS provisions by relying on the decision of the ITAT, Delhi in the case of Ram Kanwar Rana in ITA No.1307/Del/2016 dated 16/06/2016 wherein it was held as under: 4. I have heard the rival submissions and perused the relevant material on record. The controversy in this appeal can be viewed sep....
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...., the aggregate amount not included in the total income of any such previous year or years.' 5. A careful perusal of the above provision indicates that if a case falls under clause (i) of section 10(10), the entire amount of death-cum-retirement gratuity becomes exempt. Au contraire, if a case falls under sub-clause (iii) of section 10(10), then, the exemption is limited to the amount as the Central Government may notify in official gazette. It is an accepted position that the Notification u/s 10(10)(iii) issued on 24.5.2010 raised the ceiling of exemption from Rs. 3,50,000/- to Rs. 10 lac. Since the original amount was received by the assessee during the currency of an earlier year on his retirement, the exemption limit prevalent at that time at Rs. 3,50,000/- was used by the assessee. It is nobody's case that the extended limit of exemption can be applied to the assessee, because of his retirement which took place much before the cut-off date. To be more specific, the question is as to whether the extant case falls under clause (i) or clause (iii) of section 10(10). If a case does not fall under clause (i), it will automatically go to clause (iii). On a specific query fr....
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....ed under the expression 'State.' This is further corroborated from Article 12 of the Constitution of India which states that: 'In this part, unless the context otherwise requires, 'the State' includes the Government and Parliament of India and the Government and the legislature of each of the States either local or other authorities within the territory of India or under the control of the Government of India.' The expression 'other authorities' has been interpreted in Umesh v. Singh A 1967 Pat. 3(9) F.B. as including: 'a Board, a University, the Chief Justice of a High Court, having the power to issue rules, bylaws or regulations having the force of law.' The above discussion manifests that CCSU is covered within the meaning of 'State'. 8. As the assessee is found to be an employee holding a civil post under a State, in my considered opinion, the provisions of section 10(10)(i) are fully attracted in this case entitling him to exemption for the amount under consideration. Once a case falls under clause (i) of section 10(10), the same cannot be brought within the purview of clause (iii) of section 10(10). I, therefore, hold that the assessee is entitled to exemption u/s 10....
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....tablished as per the Mahatma Gandhi University Act 1985 passed by the Kerala Legislature and hence is a statutory body formed by an Act of the State legislature. It was submitted that as per the Act and Statutes, the Government of Kerala exercises direct control over the financial and administrative matters of the university and the Governor of Kerala is the Chancellor of the University, who shall appoint the Vice Chancellor of the University. It was submitted that the University was created by the State Government to discharge one of its sovereign function of imparting higher education in the State. The Ld. AR referred to the preamble to the MG University Act, 1985, which states as follows: "WHEREAS it is considered necessary to establish a new teaching and affiliating University in the State to provide for the urgent development of higher education in the areas comprised in the Kottayam, Ernakulam and Idukki revenue districts, the Kuttanad taluk of the Alleppey revenue district and the Kozhencherry, Mallappally, Thiruvalla and Ranni taluks of the Pathanamthitta revenue district of the State;". 6.1 Further, the Ld. AR submitted that the university was established by....
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.... consolidated fund of the state government and the grant for payment of salary and retirement benefits are provided by the Legislature through the budget of the State. The amount is specifically provided under the head 'salaries' in the state budget which was placed on record. Thus, there exists an employer employee relationship between the 'payer' and 'payee' i.e. the government and the employee. It was submitted that the state government retains complete and direct control over the expenditure of the university. The salary, pension and retirement benefits were directly credited to the account of the employees by the Treasury Officer. 6.4 The Ld. AR referred to Article 12 of the Constitution of India which reads as follows: "Definition In this part unless the context otherwise requires, the State includes the Government and Parliament of India and the Government and the Legislature of each of the States and all local or other authorities within the territory of India or under the control of the Government of India". The definition paraphrased is as under: a) The Government and Parliament of India; b) The Government and th....
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.... Som Prakash Rekhi vs. Union of India AIR 1981 SC 212 had culled out certain tests to determine as to when a Corporation should be said to be an instrumentality or agency of the Government. The Ld. AR summarised the tests laid down by the Apex Court with regard to how the conditions are satisfied in the case of the assessee as follows: a) If the entire share capital of the corporation is held by the Government, it would go a long way towards indicating that the corporation is an instrumentality or agency of the Government. The University is formed under a State Act and the revenue nd capital requirements of the University is allotted from the State Budget by the State Government as planned and unplanned expenditure. b) Existence of deep and pervasive State control may afford an indication that the corporation is a State agency or instrumentality. The creation and operation of the University is entirely based on a statute/Act that has been enacted by the State Government. The Financial and Administrative control over the University is with the State Government. c) Whether the Corporation enjoys monopoly status which is State conferred or ....
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....u/s. 40A(3) of the IT Act. The Supreme Court in the case of Rajasthan State Electricity Board cited supra held that the words "other authorities" occurring in Article 12 of the Constitution should be given their full dictionary meaning. The expression 'other authorities' in Article 12 will include all constitutional or statutory authorities on whom powers are conferred by law. Any public authority created by the statute on whom powers are conferred by law must be held to be a State irrespective of whether the functions of that authority are sovereign functions or non-sovereign functions. 6.8 It was submitted that the department had taken a ground that since "state government" and "university" are shown separately in section 10(10C) of the IT Act and section 192(2A) of the IT Act, the words University and state government are different and not same which has no merits for the following reasons: 1. In section 10(10C) what is contemplated is all employees of universities established under a state act are eligible for exemption even if such universities are not substantially funded by the Government of Kerala. Eg. Kerala University of Health Sciences is a university....
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.... the assessee is that the employees of the assessee are holding civil posts under the State Government. As such, the provisions of section 10(10)(i), 10(10A) and 10(10AA) of the Act are applicable to the assessee's case. Accordingly, the assessee is not liable to deduct TDS on the payment of death cum retirement gratuity, commutation of pension and leave salary to its employees. The issue to be considered is whether the provisions of sections 10(10)(i), 10(10A) and 10(10AA) of the Act are applicable or not. For this, two requirements must be fulfilled as per section 10(10) i.e., first that the employee should be hold a civil post and second such civil post must be under the State Government. The assessee herein Mahatma Gandhi University was formed as per the Mahatma Gandhi University Act, 1985 passed by the Kerala Legislature and hence, it is a statutory body formed by an Act of the State Legislature. As per the Act and Statutes, the Government of Kerala exercises direct control over the financial and administrative matters of the university and the Governor of Kerala is the Chancellor of the University, who shall appoint the Vice Chancellor of the University. The University was cr....
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....e status of Gazetted Officers of the Kerala Government Service and accordingly, the pay of the employees of the university is fixed and also revised in accordance with and at par with pay revision of the state government employees. The employees of this university are also governed by the Kerala Government Pension Rules. These Rules are the same as the Central Civil Services (Pension) Rules 1972 {CCS Pension Rules 1972). The salary, pension and retirement benefits are paid from the consolidated fund of the state government and the grant for payment of salary and retirement benefits are provided by the Legislature through the budget of the State. The amount is specifically provided under the head 'salaries' in the state budget which was placed on record. Thus, there exists an employer employee relationship between the 'payer' and 'payee' i.e. the government and the employee. The state government retains complete and direct control over the expenditure of the university. The salary, pension and retirement benefits were directly credited to the account of the employees by the Treasury Officer. 7.6 Article 12 of the Constitution of India reads as follows: ....
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....retation regarding an item of payment made by the assessee to the employee. 9. There was delay of 25 days in filing the Cross Objection by the assessee before the Tribunal. The assessee has filed a petition, accompanied by affidavit explaining the reasons for delay in filing the Cross Objections before this Tribunal as follows: 1. The Petitioner is an University formed under the Mahatma Gandhi University Act. 2. Since the income of the University is fully exempt from tax u/s.10 of the Income tax Act, the University had not filed its return of income (except in few years when refund were due) and did not have any income tax consultant or a division on a regular basis. 3. For the Assessment years 2016-17 & 2017-18, the ITO (TDS) initiated proceedings u/s.201 and 201(1A) of the Income tax Act for the alleged short deduction of tax at source, vide orders dt.31/08/2017 and 31/01/2018 4. On appeal before the CIT(A), the order of the ITO (TDS) was reversed and the demand raised was cancelled, vide orders dt. 03-09-2018. 5. Department filed appeals before the Bench against the orders of the CIT(A), which are posted for hearing before the Benc....
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....d reliance on the decision of the ITAT, Bangalore in the case of Karnataka Power Transmission Corporation Limited (2019) 102 taxmann.com 245 (Bangalore Trib.) wherein it was held that Section 192 used word 'estimate' and, therefore, statutory intention is that it should be an approximation. It was further held that where the assessee was under bonafide belief that its employees were to be regarded as employees of State Government and were entitled to exemption of entire sum of unutilized leave encashment u/s. 10(10AA)(ii), it had discharged its obligation u/s. 192 and, hence, proceedings u/s. 201(1) and 201(1A) deserved to be quashed. It was submitted that the assessee is also under the bona fide belief that its employees are State Government employees and has been deducting tax accordingly u/s. 192 and filing its TDS return for all the past years. 10.2 The Ld. AR submitted that the primary liability of the payee to pay tax remains and Section 191 confirms this. It was submitted that in a situation of honest difference of opinion, it is not the deductor that is to be proceeded against but the payees of the sums. Hence, it was submitted that no tax can be recovered from the e....
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.... the view that the facts and circumstances of the present case are identical to the case of Indian Institute of Science vs. DCIT in ITA No.1589/Bang/2014 dated 27/02/2015 for the AY 2010-11 decided by the ITAT, Bangalore. In the said case, the issue was with regard to deduction of tax at source u/s.192 of the Act on the rent free accommodation provided to employees of a statutory corporation such as the assesses. The assesses in that case took similar plea of bonafide belief as raised in the case of Karnataka Power Transmission Corporation Ltd. (102 taxmann.com 245)(Bangalore Trib.) in the present proceedings. The Tribunal considered the submissions and firstly found that the law on the issue of bonafide belief in the matter of estimating of income under the head "salaries" for the purpose of Secc.192 of the Act, was explained in a decision of ITAT Bangalore in the case of ACIT Vs. lnfosys BPO Ltd. 150 ITD 132/53 CCH 602 (Bang) in the following manner: "26. It is no doubt true that TDS is to be made at the time of payment of salary and not on the basis of salary accrued. Sec. 192(3) of the Act permits the employer to increase or reduce the amount of TDS for any excess or d....